These are interesting times in the cattle and beef markets

There are a number of factors in play right now, and it’s a 
good time to step back and survey the wider landscape

Packers lifted a lot of cattle in late summer and it will be interesting to see as we move through the fall if those fed cattle slaughtered in late summer left a gap wide enough to pull other finished cattle ahead.

This would bring lighter fed cattle to the kill floor which could be positive for pricing. Overall, beef production is high as fed cattle have heavy carcasses so fewer cattle can still amount to a lot of beef. There is some concern that the massive amount of beef (and chicken) will surpass domestic and export demand.

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It is not unusual for markets to get sensitive in an election year but cattle feeders are weary of accepting pricing below sea level. In addition to the overall production of beef, the USDA beef cut-out has fallen by 18 per cent and the pressure has been on all cuts. This means that there is tepid consumer and export interest on what are called the primals — those being the chuck, brisket, flank, loin, rib, short plate and round. (The rib and loin are the high-end cuts and we refer to these as middle meats.) Sporadic might be a good description of consumer buying.

A further complication on the demand side is the unreliable traffic in the food-service sector.

One of the key measures in that business is the consumer traffic index and this is steadily falling. This forces restaurants to try different proteins on their menu and to increase drink sales (where margins are better) to keep revenues up. In food service, beef and chicken each make up more than 30 per cent of servings followed by pork (more than 20 per cent) and then seafood, turkey, and other proteins such as bison.

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The lack of traffic in food service is likely a reflection of a changing demographic that will see consumers take into account the source of their food and the attributes of it. In addition to taking into account the cost of the meal, buyers are voting with their dollars on what they perceive as a better eating experience. Regardless, many folks just are not eating out in fast-food joints or sit-down restaurants as often as they were a year ago.

As well, many Americans and Canadians cannot afford to eat the way farmers do. It would be impossible to enjoy a full beef dinner with the fixings on the budgets that many households survive with. This is playing out both at the meat counter and in food service.

The value of hides supports cattle prices, but this business continues to be flat. Highly dependent on export, the rawhide through to luxury leather markets are under pressure. Hides offer big margins for packers and they won’t feel compelled to bid on cattle until hides show some skin.

Hogs are rolling in the mud and the market is bearish as they declined in price by 25 per cent this year. The main export market for Canada is the U.S., and hogs destined for this market are not faring well. Key export markets play an important role in hog prices.

The surprise in the proteins is turkey, which continues to see strong demand. Turkey production is down just enough to keep the market interesting and there is good export interest on frozen pieces. Turkey is finally having its day in the protein market and is not feeling the downward pressure from the chicken market and continues to maintain more than six per cent of the food-service space.

The real winner in the price arena is bison where the demand is clearly outstripping supply. Because of the gap between supply and demand, bison prices will not be pressured by the extreme downward pressure in beef.

With feed costs decent in the West, there will be good interest in lighter calves as cattle feeders think about the long term. All weights are showing signs of downward pressure from their summer bids, as the market continues to drag on the fed cattle side. This may not be a steady market. Pastures are in good shape and taking a look at forward selling might be an option before the volume comes on. Bred cows will be under pressure if the bottom gives way on the calves. This may be an opportunity for buyers.

Overall the picture is not pretty for calf, yearling or fed cattle sales but as in all things, the problem is the solution.

There are many ways to price cattle now and those who have added value to the offering through traceable actions or feeding programs will do better in the market as long as they target a market that highlights these attributes. If there are no signs of fed cattle strengthening, then the low cost of gain may not be enough to keep calf prices hot. Some cattle are being priced on the fourth quarter board for 2017. So again, there may be an advantage in forward selling some light calves.

Heifer calves continue to trade back of steers and are always the ones to keep back if you want to add value for the next calendar year. Cows will likely tank and with the amount of feed around us in the West, there may be an opportunity to get into cattle or expand. Your young open females should go into beef programs.

As always, there is little need in this day and age for cattle to move or be stressed in order to be sold and a variety of Internet selling options are available. Animal welfare should be the first consideration in every decision on marketing cattle. This year, feed testing will be especially important in farm and feedlot because of the variable weather during harvest and predicted harsh winter ahead.

About the author

AF Columnist

Brenda Schoepp works as an international mentor and motivational speaker. She can be contacted through her website at www.brendaschoepp.com. All rights reserved.

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